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spk06: Good day and welcome to the SeaWorld Entertainment Incorporated's Q2 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please know this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Head of Investor Relations. Please go ahead.
spk01: Thank you, Renan. Good morning, everyone. Welcome to SeaWorld's second quarter earnings conference call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our investor relations website at www.seaworldinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Mark Swanson, Chief Executive Officer, and Shell Adams, Chief Financial Officer and Treasurer. This morning we will review our second quarter financial results and then we will open up the call to your questions. Also, we have posted a short slide presentation on our investor website along with our earnings press release that we will discuss during our prepared remarks today. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of the federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the risk factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time, and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call, we may reference non-GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC. Now, I would like to turn the call over to our Chief Executive Officer, Mark Swanson. Mark?
spk05: Thank you, Matthew. Good morning, everyone, and thank you for joining us. We are pleased to report our fifth consecutive quarter of record financial results. While our second quarter and first half financial results were strong, these results still do not reflect a normalized operating environment, and we still have significant scope to improve our execution and our financial results. International and group related visitation is better than 2021, but is not yet back to pre-COVID levels. And our staffing improved over the course of the second quarter, but we are still not yet at optimized staffing levels. Inflationary pressures, while moderating, continue to impact costs across the enterprise. Total revenue for the quarter was up more than 24% versus 2019 and up almost 15% versus a record 2021. And our pricing power and consumer spending remain strong with total revenue per capita up significantly versus 2019 and up nicely versus a record 2021. While we were focused on getting all of our parks open and fully operating during the summer season, for the first time since 2019, we could have had more effective cost management during the quarter. We can and will work to do a better job going forward, consistent with what we have been doing for the past several years. We have several new projects and initiatives in flight that we expect will help us work to offset the unusually high inflationary pressures and become an even more efficient and profitable operating business. Further, we expect certain cyclical supply chain related and or temporary cost pressures such as energy and utilities, shipping, food, and certain wage and employee related costs to moderate over the coming months and quarters. We continue to benefit from a very strong financial position with leverage under 2.7 times, long-term debt maturities a generally low cost of debt slightly over 5%, and significant available liquidity and cash flow generation. Given this strong financial position, our clear belief in our go-forward prospects, and what we believe is an extremely attractive value being offered by the markets, we continue to aggressively repurchase shares during the second quarter and into the third quarter, exhausting our prior share repurchase authorizations. And today, we are announcing a new $250 million buyback authorization. We are pleased that preliminary July revenue continued to grow versus a record July 2021 and was up approximately 20% compared to July of 2019, and we look forward to closing out what we expect to be another solid summer. Looking ahead to the fall, we are excited about our popular Halloween events we have scheduled at our SeaWorld Busch Gardens, and Sesame Place Parks. We look forward to building on the strength of last year, including the return of Hollow Scream at SeaWorld Orlando and SeaWorld San Diego following last year's introduction, along with the first year of the Count's Halloween Spooktacular at our newest park, Sesame Place San Diego. As we continue to demonstrate, our business model is strong and resilient. and we have significant opportunities to improve and grow our revenue and profitability. As a reminder, we operate in an industry and in markets with growing demand trends over the long term, and we have significant available guest capacity across our park portfolio. Our recent attendance levels are still below the total attendance levels we achieved in 2019 and well below our historical high attendance recorded in 2008. We have made significant investments that we expect will continue to pay off, and we have specific plans we are executing on today and for the future that give us high confidence in our ability to deliver additional operational and financial improvements that we expect will lead to meaningful increases in shareholder value. In response to various questions and inquiries we have received over the past few weeks and We posted a short presentation on our investor website along with our earnings press release that provides more detail around our cost reduction and efficiency initiatives, the visitation of our PARCC portfolio, and how our industry and business performed during historical recessions. On page four of the presentation, you can see a select list of cost efficiency and reduction initiatives which aggregate to $20 to $40 million of savings. We have broken these initiatives down between our labor, SG&A, OPEX, and cost of goods sold line items. This is just a select list. It does not necessarily reflect everything we are working on or will work on over the coming months and quarters. On page five of the presentation, we show a description of the visitation of each of our markets across our 12-park portfolio and the aggregate statistic for the whole portfolio. As you can see from the page, we estimate that approximately 85% of our attendees drive to our parks. Our visitation is more similar to a typical regional amusement park business. At times, people compare our business to destination theme park businesses like Disney or Universal, but we believe our visitation and business dynamics are more closely comparable to our regional theme park peers as opposed to our destination theme park peers. On page six of the presentation, we show an industry graph that shows the growth of the industry over the last 20 years and the resiliency of the industry during the last two U.S. recessions. On page seven, we show our specific performance during the last two U.S. recessions. As you can see, we believe our business demonstrated resiliency in both the 2001 slash 2002 recession and the 2008 slash 2010 recession. As we've discussed before, we offer tremendous value to our customers, and given our attractive value proposition, and the drive-to nature of our parks and how our business has performed in past recessionary periods, we expect it will perform relatively well in future recessionary environments. We hope this helps everyone better understand our cost reduction and efficiency efforts, the drive-to and regional theme park nature of our total park portfolio, and the resiliency of our industry overall and our business in particular. Before moving to Shell and her update on financial performance, let me comment on a few more items in greater detail. First, let me comment on our balance sheet, which continues to be strong. Our LTM June 2022 net total leverage ratio is below 2.7 times, and we have approximately $531 million of total available liquidity, including $160.8 million of cash. and we expect to generate significant additional cash as we are in the middle of our historically high cash flow generation part of the year. This strong balance sheet gives us flexibility to continue to invest in and grow our business, make opportunistic investments, and to thoughtfully return capital to our shareholders. Second, we continue to make progress on our mobile app, which guests are increasingly utilized to improve their in-park experience. So far, there have been approximately 2.9 million downloads of the app, and in June, almost one out of every five guests in our parks were using and engaging with the app. We are seeing an approximate 10% increase in average transaction value for food and beverage purchases made through the app compared to point-of-sale orders, and we are seeing double-digit percentage revenue penetration across other in-park products that guests are purchasing through the app. Third, we continue to make progress with our plans to design and build hotels to complement our park offerings. We have engaged multiple consultants and industry resources to evaluate a number of site and facility concepts as we further develop our strategies. We look forward to sharing more specifics in future quarters. We repurchased approximately 7.1 million shares of common stock at a total cost of approximately $390.1 million from April 2022 through July 2022, fully exhausting the March 2022 and May 2022 authorizations. For year-to-date July 2022, we have repurchased 8.6 million shares at a total cost of $500 million. Also, our Board today approved a share repurchase authorization for $250 million. Overall, we are proud to report record net income on a trailing 12-month basis of $281.3 million and record adjusted EBITDA on a trailing 12-month basis of over $718 million which was achieved with attendance of only 21.8 million guests, which is not only below our 2019 attendance, but well below our historical high of over 25 million guests we achieved in 2008. These achievements reflect the extraordinary efforts of our teams to operate our parks, despite the challenging environment we faced, and continue to position this company for revenue growth and increased profitability. With that, I would like to introduce everyone to Shell Adams, our new CFO. We're very pleased to have Shell join our team here at SeaWorld. She brings a lot of expertise in finance, accounting, and process improvement, as well as expertise and experience in the hospitality and entertainment industry. We are glad she is here, and we have enjoyed working with her. Shel will now discuss our financial results in more detail. Shel?
spk00: Thank you, Mark, and good morning, everyone. Let me start by saying how excited I am to be part of the SeaWorld Entertainment team. I've been a fan of the brand and parks for many years. This is an incredible company with an irreplaceable set of assets, a high-quality and resilient business model, and a talented group of ambassadors. I am proud to be part of an organization and team that is committed to the highest standard of animal care and makes important contributions to conservation, animal rescue, research, and education. As Mark mentioned, our results of operations for the second quarter of 2022 and 2021 continue to be impacted by the global COVID-19 pandemic. as shown in part by the decline in both international and group-related attendance in both periods as compared to pre-COVID levels. The second quarter of 2021 was also impacted by capacity limitations, modified and or limited operations, and decreased demand due to public concerns associated with the pandemic. My commentary today will be focused on our financial results compared to 2021. However, Due to the impacts the pandemic had on our 2021 second quarter results, we provide a comparison of some of our key results versus both 2019 and 2021 in our earnings release charts, and we'll also do so in our Form 10-Q. During the second quarter, we generated record total revenue of $504.8 million, an increase of $65 million or 14.8% when compared to the second quarter of 2021. The increase in revenue is due to an increase in attendance of 7.8% and an increase in total revenue per capita of 6.4%. Attendance benefited primarily from an increase in demand resulting to a return to more normalized operations when compared to the second quarter of 2021, which included COVID-19 related impacts, including restrictions on international travel, modified and are limited operations and capacity limitations at some of our parks. However, as Mark said, we also continue to experience lingering effects of the pandemic with international and group-related visitation still not yet back to pre-COVID levels. In the second quarter, excluding international and group-related visitation, attendance would have increased 3.3% compared to 2019. Our pricing and product strategies continue to drive higher realized pricing, resulting in record total revenue per capita in the quarter of $80.59 compared to $75.71 in the second quarter of 2021. This increase was driven by improvements in both admissions per capita and in part per capita spending. Admissions per capita increased by 5% to a record $43.98 and in-park per capita spending increased by 8.2% to a record $36.61 in the second quarter of 2022 compared to the second quarter of 2021. The increase in admissions per capita was primarily due to the realization of higher prices in our admission products resulting from our strategic pricing efforts, which was partially offset by the impact of the park mix when compared to the prior year quarter. The increase in in-park per capita spending was due to a combination of factors, including pricing initiatives, improved product quality and mix, new or enhanced and expanded venues and events, and other in-park offerings. These factors were partially offset by the impact of a higher mix of past attendance when compared to the prior year quarter. Operating expenses increased $33.2 million, or 21.1%, when compared to the second quarter of 2021. With the return to more normalized operations, higher attendance, and summer staffing levels, the increase in operating expenses is primarily due to the increase in labor-related costs and other operating costs. Operating expenses were also unfavorably impacted by unusually high inflationary pressures. These factors were partially offset by structural cost savings initiatives when compared to the second quarter of 2021. Operating expenses as a percent of revenue were 37.7% for the second quarter of 2022 compared to 35.8% for the second quarter of 2021. Selling general and administrative expenses increased $13 million or 30% compared to the second quarter of 2021. The increase is primarily due to marketing-related cost, partially offset by the impact of cost savings and efficiency initiatives. Selling general and administrative expenses as a percent of revenue was 11.1% for the second quarter of 2022 compared to 9.8% for the second quarter of 2021. We believe that approximately $20 to $25 million of cost in the second quarter compared to 2019 are temporary, unusual, inflation-driven costs that we expect to moderate in the coming months and quarters. As Mark mentioned, most of these inflationary costs relate to certain cyclical, supply chain-related, and or temporary cost pressures, such as energy and utilities, shipping, food, and certain wage and employee-related costs. We generated a net income of $116.6 million, our second highest net income for the second quarter, compared to a net income of $127.8 million in the second quarter of 2021, and we generated record adjusted EBITDA of $234.4 million, an increase of $15.6 million when compared to the second quarter of 2021. The improvement in adjusted EBITDA for the second quarter of 2022 was primarily impacted by an increase in attendance and total revenue per capita when compared to the second quarter of 2021. Looking at our results for the first half of 2022 compared to 2021, total revenue was a record $775.5 million, an increase of $163.8 million, or 26.8%. Total attendance was 9.7 million guests, an increase of 1.6 million guests, or 20.5%. Net income for the period was a record $107.6 million, an improvement of $24.7 million, and adjusted EBITDA was a record $300.4 million, an improvement of $56.4 million, or 23.1%. Now, turning to our balance sheet, our current deferred revenue balance as of the end of the second quarter was $235.5 million, a decrease of approximately 1.3% when compared to June of 2021, which included impact of some COVID-related 19 product extensions. Excluding the extensions in the prior year quarter, deferred revenue would have been up approximately 11.1%. Compared to June 2019, deferred revenue increased 44.4%. At the end of July 2022, our pass base was up approximately 20% compared to July of 2019, a very healthy indicator of consumer demand for our parks and the remainder of the year. We are also seeing a higher mix of premium passes in our pass base compared to the prior year as our pass holders continue to recognize the value and benefits of our higher tier products. As Mark mentioned, we have a very strong balance sheet position. As of June 30, 2022, our total available liquidity was $531.1 million, including $160.8 million of cash and cash equivalents on our balance sheet, and $370.3 million available on our revolving credit facility, which has not yet been drawn. Cash flow from operations was a record, $228.8 million for the second quarter of 2022. Free cash flow was $162.9 million for the second quarter of 2022. We repurchased approximately 7.1 million shares of common stock at a total cost of approximately $390.1 million from April 2022 through July of 2022. We spent $65.9 million on CapEx in the second quarter of 2022, of which approximately $44.6 million was on core CapEx and approximately $21.4 million was on expansion and or ROI projects. In 2022, we plan to spend approximately $130 million to $140 million in core capital expenditures and another $50 million to $60 million on growth and ROI capital expenditures. We are investing in rides, attractions, events, and habitats to continue our strategy of having something new and compelling across our parks each year. And we have more one-of-a-kind world-class attractions that we are excited to unveil when the time is right. We are also investing in and enhancing our food and beverage and retail venues across our parks, including providing a higher quality offering and more variety, investing in technology to make our business more efficient and to enhance the guest experience, and also investing in our inorganic growth strategies to further drive shareholder value. Now, let me turn the call back over to Mark to share some final thoughts. Mark?
spk05: Thank you, Shel. Before we open the call to your questions, I have some closing comments. In the second quarter of 2022, we came to the aid of over 350 animals in need. Over our history, we have helped over 40,000 animals, including bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds, and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. I want to thank them and all of our ambassadors for all that they do to operate our parks in this current environment. We are excited about the remainder of 2022 as we finish out the summer and head into our fall and winter events. As I mentioned, our Halloween events are starting next month at our SeaWorld, Busch Gardens, and Sesame Place parks. And we look forward to the return of Hollis Cream at SeaWorld Orlando and SeaWorld San Diego following last year's introduction along with the first year of the Count's Halloween Spectacular at our newest park, Sesame Place San Diego. While we have made good progress over the past year, we continue to believe there are significant additional opportunities to improve our execution, take advantage of clear growth opportunities, and continue to drive meaningful long-term growth in both revenue and adjusted EBITDA. We continue to have high confidence in our long-term strategy, and in our ability to deliver significantly improved operating and financial results that we expect will lead to meaningful increased value for stakeholders. Now, let's go ahead and take your questions.
spk06: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We kindly ask the questioners to ask one question at a time and with only one follow-up after. That way, we will be able to answer as many questions as time allows. At this time, we will pause momentarily to assemble our roster. The first question comes from Steven Wicklinski with Stiesel.
spk12: Hey, guys. Good morning. So I want to ask about costs in the quarter. And you made a statement, Mark, in your prepared remarks that, you know, I think you mentioned somewhere along the lines of you guys could have done better with costs. And I'm just wondering what that statement means, where You know, were you more focused on top-line metrics and took your eye off the ball on cost, or does that mean something else? And then you also mentioned your staffing levels at this point are still too high, and I'm wondering how do you continue to drive those down without the resulting impact or without impacting your satisfaction scores?
spk05: Yeah. Hey, Steve. Good to hear from you. Look, I did comment about cost. Let me start by saying, look, we're still extremely – you know, when we look back versus 2019, the growth in this business from a revenue and adjusted EVA standpoint and the margin expansion, we're obviously very pleased with that. And a lot of that work has been not only on the revenue side, but certainly on the cost side. We've done a lot of good things over the last couple of years. You know, having said that, you know this, we hold ourselves to a high standard and I believe we could have done more and so does our team. And, you know, I recognize we're in a, in fairness, a very high inflationary environment, some of the highest in the history of this country. But that's the reality, and we've got to do things to adjust to that. And we announced today, not so much announced, just showed you some new initiatives and new projects that we've been working on. We have a continuous mindset set of improving, and I think there's some things around those initiatives that we can do to kind of get ahead of this this outsized inflation and try to offset as much of that as we can. But in reality, we're still very pleased. But again, we hold ourselves to a high standard and I think could have done a better job there. As far as staffing, your second question, staffing has gotten better as we move through Q2. And I think we're pleased to see that. What I meant by kind of optimizing the staffing levels is really more around what is the right mix of our employees? What is the right scheduling? What is the split between full-time and part-time? So, you know, this is really the first full summer where everything is operating comparable to 2019, if you will. And so we're kind of experiencing some of the modeling, some of the things that we did during COVID and prior, and we're seeing all that kind of play out this year. And we'll make some adjustments to get to kind of that optimized level.
spk12: Okay, gotcha. Thanks for that, Mark. And then The second question would be around your July trends, and I'm not sure how much you'll really go into those. But clearly, I think there's some concern out there in the marketplace that attendance is slowing, whether that's possibly be caused by a number of different factors. And while you said July was up year over year, just wondering if you maybe help us think about what kind of drove the July upswing. Was it more Was it more foot traffic? Was it higher ticket prices? Was it in-park spending? Just wondering if you can help us kind of think about what drove the upswing in July.
spk05: Sure. I can help you with that. So, yeah, we are pleased with our July revenue performance, as I mentioned. And what I think I can share with you is July attendance was positive and better than what we saw in June. So, you know, we did some things and you know, to, I think, drive more attendance, but not necessarily, you know, obviously give it away or anything like that. And some of our, you know, our per caps remain healthy in the month of July, especially the in-park per caps is really where we, you know, have seen some good growth. As I've said, we're always going to focus on total revenue, as we've said in the past. And so we're going to do some things to drive continue to drive attendance. We're coming into our historically popular, you know, Halloween events here starting next month, and then we'll move into Christmas. And so we like, you know, the position we're in and where we'll end up as we move into the fall. I would also say, you know, in the month of July, we accomplished what I just laid out in the face of some difficult weather in a few places, you know, specifically in our park, Busch Gardens Williamsburg. It was the least fewest good weather days that we've had back to what we have data for which is back to 1995 and then obviously if anyone on this phone has has been to Texas lately you know the heat there has been even for Texas standards quite high and I think that's had an impact obviously on our SeaWorld Park in that area so but nonetheless we wanted to call out July it did improve over June and and growing the revenue off of a record July of 2021.
spk12: Okay, great. Really appreciate the color. Thanks, Mark.
spk05: Sure.
spk06: Our next question comes from Phil Cusick with J.P. Morgan.
spk07: Hi, guys. Thank you. I wonder if you can talk and expand on the international and group attendance what sort of trends you see in July and reservations looking forward. And then second, on the staffing side, what opportunities are there for additional revenue if you were fully staffed? Thanks very much.
spk05: Yeah, hey, Phil, it's Mark. I can take that question. So what I would tell you, and I'll speak to Q2, is international attendance continues to improve. It's not you know, it's not back to the levels that we saw in 2019. It's still down, you know, in that 50% range. And, you know, we've kind of been, you know, settled in there a little bit. You know, I think when we look out on a forward-looking basis, you know, the park that has the most probably international visitation for us is Discovery Cove. And, you know, we're pleased with the bookings we're seeing there. But, you know, when international comes back You know, I don't know when exactly that will be. That depends on a lot of different factors, obviously. But, you know, it's still down, you know, 50%. You know, group attendance is down, you know, down less than that. It's down, you know, probably in the teens, somewhere in that range. And that ebbs and flows a little bit quarter to quarter for the most part. You know, what we're, I think, on the back half of the year, we see some corporate events that, you know, we feel good about. I think the key thing will be what do schools and groups like church groups and things like that do. And to the extent schools go back in session, some are back in session already and are coming back here in the next couple weeks, hopefully schools will get the green light to travel again and do field trips. And that can be more of a spring phenomenon, but we'll see what we can pick up in the fall. And then your second question on staffing, I mean, look, we – I talked about this in Q1. I think we left some money on the table, obviously, in Q1 by not having everything open and staff like we'd like to. We did a better job of that in Q2, having better staffing and more things open, and I think that certainly helps the park experience and helps us capture more of that revenue. We're still not optimized, as I talked about, so I don't want to put a number to what the opportunity is, but we just want to continue to to optimize our levels so that we can finish out the summer and then the rest of the year strong.
spk06: Our next question comes from James Hardiman with CD Group.
spk03: Hey, good morning. Thanks for taking my questions. So my first question, just as I think about versus 19 attendance. I think it was up 2% in the first quarter and it was down three in the second quarter. And I guess more specifically, it's that core business that went from plus 16 to plus three. Maybe thoughts on sort of that decel versus 2019 and just, you know, within the quarter, is it sort of a straight line between those two things or anything worth calling out there?
spk05: Hey, James. What I would focus on really is when I step back and look at everything, I look at the total revenue growth. And if you look at the total revenue growth in Q2 versus Q1, we did a little bit better in Q2 versus Q1 with less attendance, as you noted. And look, we know in some of our markets in 2019, we were comping against probably some more aggressive ticket offers in 2019 than we had this year. And, you know, nonetheless, though, we want to do better, and there's things we can continue to do better in marketing and communications, et cetera. But, look, overall, we're very pleased, you know, with the revenue growth, the per capita growth, and what we're driving there. Like I said, even relative to Q1, to do better with attendance a little bit more down than it was in Q1. We're very pleased with that total revenue growth.
spk03: Got it. And then I guess along those same lines, so July grew 20% versus 2019. The second quarter was up 24%. So it does seem like there was some deceleration versus 19 in July. There was a little bit of confusion. It sounds like attendance got better year over year, but I'm just trying to figure out versus that 2019 level, what decelerated? Was it per caps or attendance? Or am I thinking about this the wrong way?
spk05: You know, what I would say, James, is I'm really pleased with 20% revenue growth in July. I realize it's not 24, but that is still really strong growth versus 2019. Obviously, there's going to be some moderation, I'm sure, over time, but that is still very strong revenue growth. I mentioned some of the weather impacts we saw in Busch Gardens, Williamsburg, and SeaWorld San Antonio. So look, July, like I said, was better than June. The revenue growth remains very strong. The per caps are up in July. So we're pleased with that. I think we feel good about that.
spk06: The next question comes from Ben Chaikin with Credit Suisse.
spk09: Hey, how's it going? The cost savings bucket that you guys laid out, Sorry if I missed this. How many of those are already in motion versus kind of like more theoretical down the line? This is my first question.
spk05: Yeah, hey, Ben. You know, we posted some things out there, as you noted on the slide. A lot of that, it's in various stages, right? So I don't think we would talk about things if we didn't, you know, if we haven't done a meaningful amount of homework on it. So some of these things are are more further along than others. Some of these things I believe we're testing. So there's various stages of completion, various lead times, but I think what I would take away is that we have a continual focus on cost. You guys know that. We hold ourselves to a really high standard when it comes to cost, and we're going to continue to try to find efficiencies and other initiatives to to offset as much of the inflation as we can. We're in a very high inflationary time and we got to deal with that. That's the reality. We got to work hard to offset as much of that as we can. So that's what we're working on.
spk09: Makes sense. And is there any way to, in very broad strokes, kind of using the total number you guys throw out there, that 20 to 40 million, is there any way to ballpark, in broad strokes, think about how much of the inflation that would offset versus 19? So if you think about the cost inflation versus 19, Does that 20 to 40 of cost savings offset half the inflation, less than half, 75%? Is there any direction it can help us out?
spk05: I'll try to give you some comments, but I'll probably leave a little bit of the math to you. I mean, we're in some of the highest inflation we've ever had in the history of this country, right? So you can probably do the math that we had meaningful, I'm sure just like many other companies inflationary pressures. That's why we called them out. They were certainly more than a normal year. So, you know, it's a meaningful amount. I think if we can execute everything, you know, we'll have a good chance to offset a good part of that inflation. But, you know, we got to see where things land on a go-forward basis. But we're not, you know, our goal is to get more efficient. And our goal is whether there's inflation or not, we're So, you know, that's how we approach these projects.
spk06: The next question comes from Chris Oronco with Ducey Bank.
spk11: Hey, morning, everyone. I wanted to ask, and I don't know if you're going to have this level of granularity in the way you look at the business, but, you know, we know that a large number of people have relocated to Florida and and also Texas in the past couple years. Do you have any details in your analysis to show whether you're benefiting from that since you indicate a big chunk of your attendance is drive-to? Is there any way to kind of look at that and see if you're capturing those incremental people that are moving?
spk05: Hey, Chris. Thanks for the question. What I think I would comment on is you've kind of gone there, is we like the markets we're in. Obviously, you specifically called out Florida and Texas. Those are growing markets. We, in general, you know, like when more people come to a market. And so, you know, we're going to do our best to capture the share of new people coming to markets, obviously.
spk11: Okay. Fair enough. And then, follow-up questions on staffing. I think you talked last quarter about bringing in some of the J-1 visa workers to the parks in Florida. Did that transpire? Where are you versus what you had hoped to do at this time last quarter?
spk05: Yeah, good question. I think we're pretty pleased with the international programs that we rolled out. As I mentioned, We had really only used those in the past in one location, and that was primarily in Virginia. And so we expanded it to our other markets. So I think for the first year, we were generally pleased, and I think it's something that we'll continue to utilize on a go-forward basis.
spk06: The next question comes from Michael Swartz with SunTrust Robinson Humphrey.
spk04: Hey, guys. Mark, just wanted to touch on some of your comments earlier in the call, and I think you had made the comment that attendance is still pretty far removed from all-time highs back in 2008. Most of us weren't around back then, and I think you weren't publicly traded back then. So maybe give us a sense or some context of what that means. Are we at a 10% gap, 20% gap versus then? Any color would be helpful. Thanks.
spk05: Yeah, sure, Michael. I'm happy to Happy to provide that. I mean, what I can tell you is our attendance in 2008 was over 25 million people. On a most recent LTM basis, as I noted, we're under 22 million. So there's a 3 million plus gap there. Even if you look back to 2019, which we're not even back to, that was 22.6 million. And I just told you 2008 was over 25 million. And that was with one less park. So that was with 11 parks, not 12. So that's one of the things that gets us super excited about the prospects for this business. If we can capture another two to three million people, and that's just to get back to 2008. If you think about a lot of others in the industry, they've grown since 2008. So not only if we can get back to where we once were, but then grow from there. I mean, you, you can do the math on, on if you add two to 3 million people or more and how that flows through. That's one of the things that really excites us about the prospects of this business on a go forward basis.
spk04: Just follow up question was on, on, on the, some of the inflationary costs you're, you're experiencing. I think you called out 20 to 25 million. So just point of clarification there is, is, was that in the, quarter or is that kind of a run rate basis? And then are you seeing most of that in park costs versus SG&A?
spk05: Yeah, no, good question. I think you're talking about the remarks that Shell was making. So, look, in general, you know, as she noted, it was in the second quarter, that $20 million to $25 million. So it's spread across a number of things. Obviously, you have some things that I'm sure we're all not surprised about, shipping, food, various supply chain initiatives. Maybe some of the others that maybe don't come to mind at times are some of the water quality chemicals. If any of you have a pool, you probably have experienced higher costs to treat your pool. It's no different at our parks, our water parks. things like that. So there's a host of costs in there that obviously are higher that Shel was alluding to.
spk06: The next question comes from Barton Crockett with Rills and Blatt.
spk08: Thanks for the question. I want to know about your share of a purchase. So if you could describe what are the factors that drove you to sell the gas this quarter and And, you know, versus other periods when the business has been strong but you haven't done this level of share repurchase. And, you know, also talk about the re-up and, you know, how you would describe the environment here as we go into the third quarter compared to the second quarter when you did all that share repurchase. You know, has anything really changed in the environment or is it still kind of the same as it was?
spk05: Yeah. Hey, Barton, you broke up slightly at the beginning of your question, but I think you were just – I think you were asking kind of how we – We think about the share repurchase. And, you know, I made a comment in the prepared remarks that that was approved today. I meant to say that that's being announced today. So we're announcing that today, obviously. And, look, we, you know, as you've heard me say in the past, I mean, we work closely with our board on use of cash. And, you know, certainly we look at, you know, what are the best ways to deploy that for for shareholders and you can look back to this year and prior years and typically share buybacks have been one use of that cash. We can obviously also invest in our business with CapEx and we've certainly done that. We've driven a lot of CapEx into our parks over the last several years. Higher growth initiatives, consider other strategic opportunities and then return capital to shareholders. to work with our board on how we deploy cash that's in the best interest of shareholders. And I can tell you, you know, that's something that the board is very clear on, you know, making sure we do what's in the best interest of shareholders.
spk08: Okay. And then for the question, I haven't heard a lot from you guys about the Cessna Place Diego launch. I was wondering if you could describe how that's performed relative to your expectations and maybe a little bit of color about how that looks relative to the one that you have in Pennsylvania. A little color there would be helpful. Thank you.
spk05: Yeah, thanks, Barton. Yeah, we opened that park really right towards the end of Q1 in San Diego. I mentioned I was out there for the opening, and anybody that's gone out there, it's a really beautiful park. It's a beautiful setting. We like the location of Southern California. and, you know, the attractive, you know, demographic with families. So, you know, I think we're still learning, you know, and operating that park, and we're looking forward to what lies ahead. I'm excited, as I mentioned a couple times, we'll start the Halloween event there this fall called Counts Halloween Spooktacular. And, you know, the water park that was there before, Aquatica, did not have that. It was basically a, you know, very seasonal water park So what I'm excited about is transitioning to a more year-round operation in that location with the Sesame product and being able to do events like Halloween and Christmas and other events.
spk06: The next question comes from Paul Golding with Macquarie.
spk10: Thanks so much, and Shel, congrats on the role. I'm looking forward to working together. Mark, I wanted to ask about your commentary in terms of regaining the record attendance levels or that sort of an aspirational level. I guess given the labor constraints or costs and just the general inflationary environment, I guess help us think about whether that's really maybe your true goal or whether there's a sweeter spot somewhere in between where you can balance this inflationary environment and the tweaks you're making to the cost base with how much you're yielding on a per visit basis. And in a similar vein, maybe some color around the extent to which the app or your presentation on cost savings contemplates savings that you may get from the app seeing higher penetration. Thanks so much.
spk05: Sure. Sure, thanks, Paul. It's a good question about how do we think about the attendance and balance that with pricing and things like that. What I would just remind everybody is we have a couple things. One, we have a lot of capacity in our parks. We don't very few days out of the year do we have to shut down a park. So there's a lot of capacity, and I think one of the things we can do to get back to those prior attendance levels in 2008 is find ways to continue to fill where we have capacity, which is most every day for the most part. The other thing I would say is we're focused on driving total revenue. At the end of the day, that's what matters as much as anything. We will balance the right mix of attendance versus total revenue. If we can drive really high total revenue, with lower attendance, yeah, you would obviously do that. That would come with lower cost and probably a better experience in your parks and things like that. But I think there is a spot where you can do both. And, you know, that's our goal. We're not, you know, we want to grow attendance and we want to grow per caps. We think on a go-forward basis, you can grow per caps at a pretty normalized, you know, you guys know the recipe. If you can grow attendance a little bit, grow per capita a little bit, and watch your cost, the business, you know, levers up pretty nicely, right? So, you know, that's how we're thinking about it. I forgot your second question.
spk10: On the app and the extent to which potential cost savings from the app are contemplated in that presentation.
spk05: Yeah, yeah, sorry. Good question. Look, we're pleased with the app. As I mentioned, you know, we're seeing people use the app. We are still, I would say, in the early stages of we do have, you know, we have mobile ordering, things like that. And so there's certainly, you know, if you think about in a park, if you could have a restaurant that is only, you know, carry out only, if you will, or mobile only, right, I think you could obviously have some staffing savings there because you're effectively just making the food and people are picking it up. And, you know, they're paying on the app and things like that. So that is more efficient. And that's what we are rolling out or have rolled out in some of our parks. You know, our goal is to have more of that. And there's some, you know, things we got to do just logistically to make that happen a little bit better in some of our parks. But, you know, we're excited that we've got an app and people are using it.
spk06: The next question comes from Eric Wold with V Riley Securities.
spk02: Thanks. Good morning. I want to hit on the $25 million attendance one more time, just ask a different way. I guess when we think about that, what has changed besides the addition of obviously one more park, maybe what has changed structurally within the park since then that could accommodate more guests, the additional space? more food and beverage, more rides. I guess one is trying to get a sense of how low that $25 million could actually be over time, or maybe asked a different way, what do you think the attendance number is where you start to see an adverse impact to guest experience? I mean, if you have any information on what guest satisfaction scores looked like back then with that level of attendance back in 08, trying to get a sense of that kind of peak number. Yeah.
spk05: Yeah, no, thanks for the question, Eric. And look, just to remind everybody, the $25 million is getting back to 2008. If we had grown, you know, since that time, you know, we'd probably be talking closer to, you know, $30 million or something in that range. So we absolutely have capacity in our parks. I mean, like I said, we don't, we have very few days where we're at full capacity. I'm talking like, you know, 4th of July or New Year's Eve, and that's still not at every park. So we have room in our parks. We've added a number of new attractions over the years. We have more attractions on the horizon. We've done different new lands and realms and things like that. So I'm confident that we can still attract more people, obviously, and still have plenty of room and can deliver on an experience that people will find enjoyable. So feel good about the capacity availability in our parks, if you will.
spk03: Got it. Thank you.
spk06: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Mark Swanson for any closing remarks.
spk05: Well, thank you, Renan. On behalf of Shell and the rest of the management team at SeaWorld Entertainment, I want to thank you for joining us this morning. As you heard today, we are confident in our long-term strategy, which we believe will drive improved operating and financial results and long-term value for stakeholders. So thank you for joining us today, and we look forward to speaking with you next quarter.
spk06: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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